Promotion and Pricing Strategies

Chapter 13

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Learning Objectives

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Discuss integrated marketing communications (IMC).

Summarize the different types of advertising.

Outline sales promotion.

Describe pushing and pulling strategies.

Discuss the pricing objectives in the marketing mix.

Outline pricing strategies.

Discuss consumer perceptions of prices.

Promotion is the function of informing,

persuading, and influencing a purchase

decision.

Integrated marketing communications (IMC)

is the coordination of all promotional activities—

media advertising, direct mail, personal selling,

sales promotion, and public relations—to

produce a unified, customer-focused message.

Promotion

Must take a broad view and plan for all form

of customer contact.

Create unified personality and message for

the good, service, or brand.

Elements include personal selling,

advertising, sales promotion, publicity, and

public relations.

Integrated Marketing Communications

Promotional mix- combination of personal and

nonpersonal selling components designed to

meet the needs of their firm’s target customers

and effectively and efficiently communicate its

message to them.

Personal selling- the most basic form of

promotion: a direct person-to-person

promotional presentation to a potential buyer.

Nonpersonal selling- advertising, sales

promotion, direct marketing, and public relations.

Promotional Mix

Components of the Marketing Mix

Objectives of Promotional Strategies

Product placement- marketers pay placement

fees to have their products showcased in various

media, ranging from newspapers and

magazines to television and movies.

Guerilla marketing- innovative, low-cost

marketing efforts designed to get consumers’

attention in unusual ways.

Promotional Planning

Advertising- paid nonpersonal communication

usually targeted at large numbers of potential

buyers.

Advertising expenditures are great– carmakers spend

$20 billion per year.

Consumers are bombarded with many messages.

Firms need to be more and more creative and

efficient at getting consumers’ attention.

Advertising

Product advertising- messages designed to sell a

particular good or service

Institutional advertising- messages that promote

concepts, ideas, philosophies, or goodwill for

industries, companies, organizations, or government

entities

Cause advertising- institutional messaging that

promotes a specific viewpoint on a public issue as a

way to influence public opinion and the legislative

process

Avon Foundation

Types of Advertising

Informative advertising- used to build initial

demand for a product in the introductory phase

Persuasive advertising- attempts to improve the

competitive status of a product, institution, or

concept, usually in the growth and maturity stages

Comparative advertising- compares products

directly with their competitors either by name or by

inference

Reminder-oriented advertising - appears in the

late maturity or decline stages to maintain

awareness of the importance and usefulness of a

product

Advertising and the Product Life Cycle

Advertising Media Pie

Television Easiest way to reach a large

number of consumers

Most expensive advertising

medium

Newspapers Dominate local advertising

Relatively short life span

Radio Commuters in cars are a captive

audience

Internet radio offers new

opportunities

Types of Advertising

Magazines Consumer publications and trade

journals

Can customize message for

different areas of the country

Direct Mail Average American receives 550

pieces annually

High per person cost, but can be

carefully targeted and highly

effective

Outdoor Advertising $5.9 billion annually

Requires brief messages

Internet Advertising Search engine marketing, display

ads, classified ads

Online and Interactive Advertising

Viral advertising creates a message that is novel or

entertaining enough for consumers to forward it to others,

spreading it like a virus.

Many consumers resent the intrusion of pop-up ads that

suddenly appear on their computer screen.

Sponsorship

Providing funds for a sporting or cultural event in exchange

for a direct association with the event.

Benefits: exposure to target audience and association with

image of the event.

Other Media Options

Marketers look for novel ways to reach customers: infomercials, ATM receipts, directory advertising.

Types of Advertising

Sales promotion

consists of forms of

promotion such as

coupons, product

samples, and rebates

that support

advertising and

personal selling.

Sales Promotion

Premiums, Coupons, Rebates, Samples

Coupons attract new customers but focus on price rather than

brand loyalty.

Rebates increase purchase rates, promote multiple purchases, and

reward product users.

Three of every four consumers who receive a sample will try it.

Games, Contests, and Sweepstakes

Introduction of new products.

Offer cash, merchandise, or travel as prizes to participating winners.

Subject to legal restrictions.

Specialty Advertising

Promotional items that prominently display a firm’s name, logo, or

business slogan.

Customer-Oriented Promotions

Sales promotion geared to marketing

intermediaries rather than to consumers

Encourage retailers:

To stock new products

To continue carrying existing ones

To promote both new and existing products effectively

to consumers

Trade-Oriented Promotions

A person-to-person promotional presentation to

a potential buyer

Many companies consider personal selling the key to

marketing effectiveness.

A seller matches a firm’s goods or services to the

needs of a particular client or customer.

Today, sales and sales-related jobs employ about 16

million U.S. workers.

Businesses often spend five to ten times as much on

personal selling as on advertising.

Example: Selling to the government or military.

Personal Selling

Order Processing

Identifying customer needs, pointing out merchandise to meet

them, and processing the order

Creative Selling

Promotes a good or service whose benefits are not readily

apparent or whose purchase decision requires a close analysis

of alternatives

Missionary Selling

Indirect form of selling in which the representative promotes

goodwill for a company or provides technical or operational

assistance to the customer

Telemarketing

Personal selling conducted entirely by telephone, which provides

a firm’s marketers with a high return on their expenditures, an

immediate response, and an opportunity for personalized two-

way conversation

Sales Tasks

The Sales Process

Prospecting, Qualifying, and Approaching

A good salesperson

varies the sales process

based on customers’

needs and responses.

Prospecting- identifying

potential customers

Qualifying- identifying

potential customers

Approaching- analyzing

available data about a

prospective customer’s

product lines and other

pertinent information

Presentation and Demonstration

Presentation

Salespeople communicate

promotional messages.

They may describe the

major features of their

products, highlight

the advantages, and cite

examples of satisfied

consumers.

Demonstration

Reinforces the message

that the salesperson has

been communicating.

Handling Objections and Closing

Use objections as an

opportunity to answer

questions and explain how

the product will benefit the

customer.

The closing is the critical

point in the sales process.

Even if the sale is not

made, the salesperson

should regard the

interaction as the

beginning of a potential

relationship.

Follow-Up

An important part of

building a long-lasting

relationship.

May determine whether

the customer will make

another purchase.

Public relations- a public organization’s

communications and relationships with its various

audiences.

Is an efficient, indirect communications channel for promoting

products. It can publicize products and help create and

maintain a positive image of the company.

Publicity- nonpersonal stimulation of demand for a

good, service, place, idea, event, person, or

organization by unpaid placement of information in

print or broadcast media.

Good publicity can promote a firm’s positive image.

Negative publicity can cause problems.

Public Relations

Pushing strategy- relies on personal selling to market an item to

wholesalers and retailers in a company’s distribution channels.

Companies promote the product to members of the marketing channel,

not to end users.

Pulling strategy- promote a product by generating consumer

demand for it, primarily through advertising and sales promotion

appeals.

Potential buyers will request that their suppliers—retailers or local

distributors—carry the product, thereby pulling it through the distribution

channel.

Most marketing situations require combinations of push and pull

strategies

Cooperative advertising- allowances provided by marketers in

which they share the cost of local advertising of their firm’s product

or product line with channel partners.

Promotional Strategy

Pricing Objectives in the Marketing Mix

Price- exchange value of a good or service.

Profitability objectives

Maximize profits by reducing costs.

Maintain price while reducing package size.

Volume objectives

Base pricing decisions on market share goals.

Pricing to meet competition

Meeting competitors’ price.

Competitors cannot legally work together to set prices.

Competition can result in a price war.

Pricing Objectives

Prestige Objectives

Establishing a relatively high price to develop

and maintain an image of quality and

exclusiveness.

Recognition of the role of price in

communicating an overall image for the firm

and its products.

Products that are limited in distribution or so

popular that they become scarce generate

their own prestige.

Pricing Strategies

Formulas that calculate total costs per unit and

then add markups to cover overhead costs and

generate profits.

TOTAL COSTS PLUS MARKUP

Actual markup used varies by such factors as

brand image and type of store.

Typical markup for clothing is determined by doubling

the wholesale price (the cost to the merchant).

Cost-Based Pricing

Breakeven analysis- pricing technique used to

determine the minimum sales volume a product

must generate at a certain price level to cover all

costs.

Break-Even Analysis

Break-Even Analysis

Skimming pricing Setting an intentionally high price relative to the prices of competing products

Helps marketers set a price that distinguishes a firm’s high-end product from

those of competitors

Penetration pricing Setting a low price as a major marketing weapon

Often used with new products

Everyday low pricing and discount pricing Maintaining continuous low prices rather than relying on short-term price-cutting

tactics such as cents-off coupons, rebates, and special sales

Discount pricing - businesses hope to attract customers by dropping prices for a

set period of time

Competitive pricing Reducing the emphasis on price competition by matching other firms’ prices

Concentrating marketing efforts on the product, distribution, and promotional

elements of the marketing mix

Alternative Pricing Objectives

Price-quality relationships

Consumers’ perceptions of quality closely tied

to price

High price = prestige and higher quality

Low price = less prestige and lower quality

Odd pricing

Setting prices in uneven amounts or amounts

that sound less than they really are

Example: $1.99 or $299

Consumer Perceptions of Price